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EDA: ByteSnap


recently, it’s been very successful. However, this type of crisis, in a sense, really shows its weakness.


It’s not surprising that it’s the automakers who use it very heavily who have been the ones who’ve been hit hardest. There are many disadvantages, principally costs, to people holding stock, which is why Just In Time came about in the first place.


The other thing that COVID highlighted was just how massively over-dependent the West is on China, which we already knew, to be honest. Now though, that over-dependence has really been put into very sharp focus. I would hope for more diversification as a result of this and I think most people will source alternatives closer to home.


What new processes have replaced those and why are these new ones better suited for the electronics design industry?


The crisis has highlighted the benefit of designing with parts that can be multi-sourced. Unfortunately, with semiconductors, quite often that’s impossible or at best extremely difficult. We’re still seeing requests for designing of boards with the ability to fit two or three different components in one position though, to perform a function, just so that the customer is able to be flexible about what they build. As it’s not just a design issue, in theory, that applies to all kinds of builds; they all need prototyping, testing, compliance – possibly lifetime testing, in some cases. Otherwise, you’re looking at reliability issues down the line, and a situation where someone builds 10,000 units with a part listed as fine, when – in fact - it’s never actually been built with.


How is the supply chain now for the electronics design industry? There’s no stock being held, really, and this is an issue. Currently, the semiconductor companies are allocating stock to distributors, but distributors are only getting a fraction of what they’re buying in many cases. Although this isn’t universal, a distributor might only get, say, 40% of what they asked for. So, they’re trying to keep a lot of people happy off not being given enough stock. I think the challenge for the semiconductor companies is that it would be very easy just to supply the big fish - the big accounts - and to ignore all the smaller accounts. That would be negative though, because it would mean they just wouldn’t be a part of the next generation of products from up-and-coming innovators. Also, these big accounts are also ones that can change their mind and switch to other suppliers – sometimes, at very short notice. I think, certainly among the people working for semiconductor companies that I’ve spoken


www.cieonline.co.uk


to, this is recognised and many savvy electronic semiconductor suppliers are trying to keep the smaller accounts happy as well, and not just give everything to a few big customers.


Are there any component manufacturers who are doing particularly well?


Basically, component manufacturers are doing incredibly well. They’re making hay while the sun shines - putting their prices up and shipping enormous amounts of volume. The ones I’ve spoken to say they’ve never shipped so much product, they’re just flat out, everything they make is getting sold, so there’s no stock. Clearly, from their point of view, they’re raking it in. The most popular component manufacturers like ST and NXP and Microchip are really struggling to supply because, partly, they’re victims of their own success. In the long term, the danger for these companies is that they’ll lose slots to smaller companies that are better able to supply and, once they’ve lost those slots, it will be a struggle to get them back again. This is a particular challenge for fabless semiconductor companies.


Has the previous reliance on imports - from mainland China for example - reduced post-pandemic? I think that although there is a longing for it to reduce, we haven’t yet seen it reduce enough. The fact is that you’re talking about billions of dollars’ worth of investment to build semiconductor fabs. Even factories doing assembly have a level of investment required as the assembly is not usually something that can be knocked up in five minutes. In a crisis, just building the factory and kitting it out itself is difficult, but add to that the need to also train staff and implement measures now for social distancing. There is also a problem with a lack of skills in semiconductor manufacture outside of SE Asia. The longer the West relies on SE Asia for semiconductor supplies, the deeper this problem will become.


The current constraints we have mean it’s much easier to retain the status quo and just buy from people you already bought from and hope for the best. There’s definitely a desire for mainland China imports to reduce and we hear that time and time again, from customers who come to us saying they would really like less reliance on China. But the reality is that we are where we are because China is so dominant in manufacturing, so it’s not easy for other countries to grab a significant market share.


What does that mean for UK businesses?


This over-reliance has been brought into sharp focus now more than ever before. For


instance, you can’t visit China at the moment. In the past, we would have advised anyone who wanted to manufacture in China in a serious way to have somebody there who works directly for them, who can help manage the process, or that they go and visit China a lot themselves. For UK businesses now, I think there will be some repatriation – there already was. Certainly, what we’re hearing from customers and new clients is “we’d build this, but we’d really like to build it more locally”. One of the reasons for that is just the whole ease of management and security. Ultimately, a lot of the end components, electronic components, are still going to come in from China. And that isn’t going to change anytime soon with things the way they are.


Has Brexit affected supply chains - how?


In the grand scheme of things, Brexit has been a bit of a sideshow in that the big issues are not to do with Brexit. That said, Brexit has been yet another fly in the ointment. There’s no positive. It’s only a question of how negative it is. A lot of components - catalogue supplies, for instance - had diverse factories and sites throughout Europe to ship things in from there. We’ve just seen next day delivery, which used to be just something we used all the time with some of the catalogue companies, become stretched out to a week or certainly a number of days. It’s been really disruptive, despite all the advance warning and preparation in the run-up to Brexit. Shipping to Europe has become a real lottery, depending on the country.


We’ve dispatched shipments with all the correct paperwork, and we’ve ended up having to have it sent back to the UK, just because it’s just got stuck in customs in some countries. I think with some of the European customs countries, they are like a law themselves, and they’re not really abiding by the trade agreement - or certainly not by the spirit of it - even if they might argue they are abiding by the letter of it.


If it wasn’t for COVID, the disruption would absolutely be front-page news, because it has been such a negative. We’ve got customers in Europe and we want to ship things to them and have them be able to ship back to us easily. It’s gone from being a few days to being a week or a number of weeks now, coupled with a lack of certainty of the shipment actually arriving. As I said, I think politics are being played by some of the countries. It’s not a common pitch across the EU, more of an unruly raffle, with different countries doing different things. To be honest, it’s easier at the moment to get stuff out of the US than it is to get anything out of Europe.


What can be done to mitigate those disruptions, if there are any? Planning, and setting expectations with customers and suppliers. Being careful with part selection. With Brexit, it’s about using a good forwarding service that helps you because, at the moment, shipping is a real irritant. Also, building in the UK. Do as much as you can locally, rather than relying on other countries. That does mean, of course, there’s a price to be paid for that. There’s a reason why we have more of a global free economy; it should benefit everyone. History tells us that to retreat into more of an insular set-up and trying to do it all yourself isn’t generally economically beneficial for anyone.


Are there any upticks in all of this? I think it’s hard to be an entrepreneur and set a business up without being an optimist, because you just wouldn’t want to get out of bed in the morning...therefore, yes, I think so. Society has jumped forward by number of years in innovation space and time, in terms of remote working, remote ways of life. And much of that is driven by technology, and effectively healthcare as well - healthcare technology is massive.


Regarding Brexit, I don’t see it ever getting back to how it was. With time, however, I’d hope a lot of these teething issues will be sorted out, but there’s a constant threat of little trade tiffs and disputes. Still, I’m optimistic that with time and good governance, less ideology and more pragmatism, some of these issues will be sorted out and we’ll have better, more free flowing shade.


With COVID, again I believe that this will pass. Now, we don’t know if we’re talking months or years, but ultimately it will pass and new capacity will come on stream. We’ve seen supply chain disruptions a number of times over the years. At the moment, everyone’s saying this is the worst they have ever seen it, because it’s affecting so many right across the board. In the past though, it’s been things like memory components becoming very hard to get but everything else being okay. As COVID goes, demand decreases so you end up with oversupply. Then, once you start getting over supply in some areas, it can ripple out, because people will jump on that instead of where they’re having problems – thus, reducing the demand in other areas. We’re in the middle of a storm and we need to navigate it. But we will get out of the storm at some point. Whilst this is still a tough time, the electronics design industry is resilient and there’s a lot of new product design going on and technology development too.


bytesnap.com Components in Electronics July/August 39


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